ObservePoint: Good Things Can Come From Neighbors

“What we started to realize, the market was getting more and more ready, the product was continuing to advance as well and what we wanted was to really grow this.”

What if you started a business with your neighbor? For most of us, that’s pretty much a recipe for disaster — mine would concentrate on either drug distribution or a bunny rabbit farm, but that’s mainly because I live by a decent amount of methheads.

For Rob Seolas and John Pestana, co-founders of ObservePoint, sharing a backyard wasn’t a recipe for disaster, but the starting point of something exciting, new, and profitable. Both had successful backgrounds in the startup space: Seolas with iLeadMedia, Pestana with Omniture. In 2007, when the time came to move on, they journeyed together down a seldom-used path: partnering up with a neighbor.

“Our wives were good friends and marathon training partners,” Seolas told Beehive Startups in a recent interview. “While iLead was rapidly growing, John had started to take off with Omniture. So we kept track of each other’s careers almost through our wives because we were so heads-down, busy with what we were doing.”

“There was a day where he and I met for lunch, the timing was just right, and he said, ‘Let’s do something together.’ That became the starting point for ObservePoint. We both wanted to stay in the online space, but it was interesting because John wanted to do more in the area I had been in, which was affiliate marketing, and I wanted to do more in analytics. After you spend a decade in one particular space or vertical, you’re always interested in some of the other ones.”

I know what you’re thinking — why doesn’t my neighbor have tons of money and successful business ideas? It’s a question we’ve all asked, but never had answered. With ample experience in the marketing and analytics worlds, Seolas and Pestana were able to create a product that effectively combined both elements. Thus, ObservePoint was born.

“We came up with two different products that would become our core technology,” Seolas said. “One is a site audit, which is a full analytics/data-quality assurance audit that’s built on our platform. We’re validating all the different marketing technologies that are used across the industry…at the same time, we also built a system to help validate key metrics, key pages, in a real-time daily way. So we’re able to track data technology and market technology and validate that they are collecting all the data they’re intending to.”

In addition to their combined skillsets, Seolas and Pestana had the extra advantage of already having a large amount of money to invest in ObservePoint. As it turns out, having successful business transactions in your past is a pretty big bonus. This meant ObservePoint was able to successfully navigate a path many startups have died on: bootstrapping.

“Philosophically, we like what happens when you bootstrap a company,” Seolas said. “Even though we were doing SaaS, which is particularly hard to bootstrap, we still had managed to pull it off. We just liked what it does to a company and the culture it creates.”

Even with roots sunk deep in the world of bootstrapping, Seolas and Pestana recently determined that outside funding was necessary — sooner or later, every major company needs a big-time money boost.

“We bootstrapped all the way until this raise, in December of last year,” Seolas said. “Before that, we were just self-funded, with John’s background and mine we were able to put significant capital into the company. We got it to a point where we didn’t have to put anymore money in, we were essentially cash-flow positive for 18 months. What we started to realize, the market was getting more and more ready, the product was continuing to advance as well and what we wanted was to really grow this. Our real constraint at that point was capital, so that’s why we decided to do the raise.”

This is where Pelion Ventures and Peak Ventures enter the story. Presented with the idea of backing ObservePoint, both venture firms jumped at the chance to invest. And with an added $6.5 million, ObservePoint is now preparing for a jump to warp speed.

“Our foot had always been on the gas, we had been going as fast as we could, but we were only in second gear as a business,” Seolas said. “We felt like the additional capital would allow us to go to third and fourth gear that much quicker.”

Added capital has to go somewhere. Different companies obviously pump money into different areas — some invest in product management, others in development. Seolas and Pestana have very specific ideas on what areas they’d like to see souped up.

“Our raise was designed to drive sales and marketing,” Seolas said. “It’s hard to go big with a marketing budget and bootstrap it. Same with a sales team — it’s hard to build a full, enterprise-class sales team and bootstrap that. Sometimes it’s just better to go from a few guys to a full team.”

If you’ve read this story and hate your neighbor even more for not having any discernible talents contributing towards your financial gain, I can’t blame you. Though time and family growth have necessitated Seolas and Pestana moving into different houses, the partnership formed when they were neighbors remains strong as ever.

So the next time you want to go ballistic on somebody in your neighborhood for “borrowing” your shovel, remember the story of ObservePoint: good things can come from neighbors.